Budget 2009: Government finances

The chancellor faces a difficult Budget balancing act as he seeks to deliver the tax hikes and spending cuts necessary to stabilise the public finances while also keeping alive Labour's hopes for the next general election.

Alistair Darling will have gained some room for manoeuvre from recent Conservative rethinks on tax and spending policy, and the Opposition's warnings that balancing the Treasury books should be a priority.

With an election due to be held by June 2010, ministers will be hoping to delay as much bad news as possible.

That will mean a tighter spending round beginning to bite after the next election, while tax rises may be delayed to avoid undermining any recovery from recession.

But that will leave government borrowing to take the near-term strain.

Roger Bootle, economic adviser at Deloitte, has predicted the chancellor will have to raise his borrowing forecasts by £250bn between now and 2012/13.

And that rise comes without further stimulus measures, about which the governor of the Bank of England has urged caution.

Mervyn King, giving evidence to the Commons Treasury Committee, said: "I think the fiscal position in the UK is not one where we could say, well, why don't we just engage in another significant round of fiscal expansion."

Deloitte said the chancellor made significant tax increases and spending cuts in the pre-Budget report.

But the accountancy firm suggested that Darling could go further by asking businesses to pay tax a little earlier.

It explained: "The main months for corporation tax payments are July, October, January and April. Simply moving the April payment into March would bring forward tax revenue on a one-off basis, without a major cost for companies.

"Yet another option could be to increase the basic rate of income tax by one per cent, to 21 per cent.

"This would raise over £3bn and would cost someone earning £25,000 a further £3.50 per week - more than the VAT increase."

Darling is also expected to make the most significant official revision to a growth forecast in the history of the British economy.

The chancellor's prediction in the pre-Budget report of a decline between 0.75 per cent and 1.25 per cent is expected to be changed to between 3 per cent and 3.5 per cent.

This will mean, the Daily Mail has suggested, that the chancellor will admit that the public finances will take "some time" to be re-balanced.